After Natwest’s bumper profits on Friday it is the turn of Barclays (Tuesday) and Lloyds (Thursday) to see if they can repeat the trick while the giant of the big four quartet, Asia-focused HSBC, splits the pair on Wednesday.
Optimism for Lloyds
Lloyds Banking Group PLC (LSE:LLOY) is closest to Natwest in structure and the domestic markets it serves, so the good showing from its rival today should bode well.
“Lloyds faired pretty well back at third-quarter results, the only major UK bank to see underlying profit before tax improve from the prior quarter,” noted Hargreaves Lansdown.
“As a traditional lender with operations geared toward interest income, net interest margin (NIM) is key,” Hargreaves added.
Analysts are looking for 3.01% in the fourth quarter.
Aside from that, it should been plain sailing except now a rock has been thrown in into the pool in the shape of Close Brothers scrapping its dividend yesterday due to the FCA’s car finance probe.
Lloyds, too, is big in this market but according to Jefferies, “other than the fact that Close Brothers and Lloyds both operate in the car finance market, the two firms cannot be compared".
Lloyds has experience in operational complexities related to redress schemes [think PPI], Jefferies said, while the scale of any such refunds would have a very different impact on each firm.
The US bank also stuck to a forecast of a £2.5 billion Lloyds share buyback for 2023.
Subject to any additional provisioning, Lloyds is tipped to up full-year underlying profits by 15% to £8.1bn according to consensus.
Barclays to review
Barclays PLC (LSE:BARC) results will be accompanied by a strategic review of the business.
Hargreaves believes there will be a focus on cost reduction rather than material business changes, especially in the UK which sits well above peers on a cost-to-income basis.
“The real question for investors is whether restructuring charges taken over the fourth quarter will impact the expected £890mn buyback – of course, nothing is guaranteed.”
Barclays Investment Bank is forecast to have had another weak quarter but the M&A deal wheels are starting to turn again, which might bode well for later in the year.
Profits for the year are forecast at around US$7.3bn, up 3% but as with all the banks that depends on what particular line of the P&L you choose.
HSBC's China exposure
HSBC Holdings PLC (LSE:HSBA) meanwhile will have to deal with the fallout of the Chinese property crash on its Hong Kong-based operations.
The bank is also especially geared to movements in US interest rates, so assumptions on how they will move over the next year might have changed given recent data and Fed comments.
Profits are forecast to rise to a massive US$33.4bn for the full year 2023 with around US$7bn being made in the fourth quarter alone.